JUNE 29, 2005 -- Senate Finance Committee Chairman Charles E. Grassley made clear Wednesday at the second day of a two-day hearing on Medicaid fraud that he regards the drug industry as a big part of the problem. And he told drugmakers to make sure they do not try to weaken his prized tool for going after fraud, the False Claims Act.

Grassley, R-Iowa, also explored witnesses' reactions to a variety of other tactics for reining in Medicaid drug spending, including basing payment on the "ASP" (average sales price) method now in use for some Medicare drugs, and sharing pricing data with the states that is now kept confidential.

After the first day of the hearing (CQ HealthBeat, June 28, 2005), Grassley estimated that $4 billion could be saved through greater use of generic drugs in Medicaid and changes in the current "AWP" (average wholesale price) system of Medicaid drug reimbursement.

Federal and state anti-fraud prosecutors underscored Wednesday that they view the drug industry as a big target. Department of Justice (DOJ) attorney Timothy J. Coleman said that in pure dollar terms, "pharmaceutical pricing schemes perpetrated against state Medicaid programs" have been the most significant area in Medicaid fraud seen by DOJ enforcement officials.

Patrick J. O'Connell, who heads the Medicaid Fraud Section of the Texas Attorney General's office, said his unit has pursued claims against doctors, hospitals, and other providers, but "the overwhelming majority of our time and efforts have been concentrated on drug manufacturers," he said. "Did we target or place special emphasis on drug manufacturers on purpose? No. The fact is that whistleblowers brought us cases which showed significant fraud in amounts which dwarfed the cases against other providers."

Grassley said that between 2001 and 2004, the Justice Department and state attorneys general recovered nearly $2.5 billion from various pharmaceutical companies because of Medicaid and Medicare fraud.

He sought assurances from Marjorie Powell of the Pharmaceutical Research and Manufacturers of America (PhRMA) that the powerful lobby is not funding a campaign to change the False Claims Act, used by federal officials to recover billions of dollars in fraud cases against a variety of industries.

Powell replied that she was not aware of such an effort. But she suggested that the act's penalty provisions providing for exclusion of a drug company from the Medicaid program may be inappropriate in light of the enormous burden she said it would place on patients needing the company's drugs.

Grassley said to Powell that defense contractors had worked with the hospital industry to try to gut the False Claims Act and advised PhRMA to make sure it does not follow a similar course. Grassley also is prodding drugmakers to educate their employees about the whistleblower-protection provisions of the act, which allow those who report fraudulent activities leading to settlements to get part of the money recovered.

Beatrice Manning, a whistleblower in a case brought against the drugmaker Schering-Plough, testified that educating drug company employees about the act could reduce fraud. "It has the potential of having a noticeable chilling effect" on the activities of managers if they know employees know how to report them, she said.

Federal officials involved in curbing fraud said it is time to change the current AWP system. The "takeaway" message from the hearing, Coleman said, is that pricing mechanisms used in Medicaid to reimburse for pharmaceuticals are "problematic and subject to manipulation."

JUNE 27, 2005 - Fiscal 2006 spending approved Friday by the House of Representatives will disappoint those trying to strengthen the nation's health care safety net, with funding for community health centers falling $203.5 million below the sum requested by the Bush administration and lawmakers voting to end the $83 million Healthy Communities Access program.

But the spending measure (HR 3010), approved 250-151, contains a huge increase in health care entitlement spending: $54 billion for the Medicare prescription drug benefit, expected to improve health care for millions of Medicare beneficiaries, many of them poor.

The administration sought a $303.6 million increase in funding for community health centers, a major element of its plan to improve care for the uninsured. The House voted an increase of $100 million, which would bring total spending next fiscal year on community health centers to $1.83 billion.

The Healthy Communities Access program draws bipartisan praise for funding local efforts to provide preventive care to the uninsured. Defenders say it heads off far greater outlays by reducing the need for poor people to make costly visits to the emergency room for care. But the program was seen as a victim of efforts to come up with funds to head off House cuts in outlays for public broadcasting.

The House also voted to cut funding for health professions programs by $253 million. Backers say the programs help reduce disparities in access to care by training minority physicians and other health care professionals more likely to practice in underserved areas.

The House voted to provide $300 million to fund graduate medical education programs in children's hospitals, $100 million more than was requested by the Bush administration, and about flat with current funding. House members voted to cut funding by $24 million for the maternal and child health block grant, to a total of $700 million. Administered by the Health Services and Resources Administration, the block grant funds a wide variety of health care programs for children.

The spending measure provides $2.058 billion for Ryan White AIDS programs, an increase of $10 million. It allots $6.1 billion for the Centers for Disease Control and Prevention, $295 million below the fiscal 2005 level. The spending level approved by the House for CDC to prevent chronic diseases and carry out health promotion activities is $42 million below the figure for fiscal 2005.

The House approved an outlay of $28.5 billion for the National Institutes of Health. That's $142 million more than current funding, an increase of about 0.5 percent. The budget total for the Agency for Healthcare Research and Quality is $318.7 million, the same as this year. Funding includes $84 million for reducing medical errors, $50 million of which goes for grants to increase the use of health care information technology. As is the case in fiscal 2005, research to compare the clinical effectiveness of drugs, devices, and health care services receives $15 million under the House measure.

Among the amendments defeated by the House was language proposed by Rep. Maurice D. Hinchey, D-N.Y. prohibiting the use of funds in the bill to distribute the personal information of Medicare and Medicaid beneficiaries to private companies for marketing purposes. The House adopted an amendment by Rep. Bob Filner, D-Calif., to prohibit the use of funds to place Social Security account numbers on Medicare identification cards.

JUNE 30, 2005 -- As senators reached across the aisle Thursday to introduce bipartisan measures to spur health information technology and link Medicare payment to the quality of care delivered, industry and government officials expressed concern that legislation not interfere with existing efforts to accomplish those goals.

At a joint press conference, Senate Health, Education, Labor and Pensions Committee Chairman Michael B. Enzi, R-Wyo., and the panel's ranking Democrat Edward M. Kennedy, D-Mass., unveiled legislation that would accelerate the adoption of health care information technology nationwide. Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, and Sen. Max Baucus of Montana, the committee's ranking Democrat, introduced a measure that would link a portion of Medicare's reimbursement for health care services to the quality of care.

Dr. David Brailer, national coordinator for health information technology at the Department of Health and Human Services who is coordinating the administration's efforts on "Health IT," told a Senate panel that "there is concern about legislation slowing down this process" and that legislation "could create uncertainty about where we want to go." Brailer made his remarks during a Senate Commerce Subcommittee on Technology, Innovation and Competitiveness hearing on health information technology.

Karen M. Ignagni, president and chief executive officer of America's Health Insurance Plans, a trade group representing insurers, said it would be a "mistake" to relax federal fraud and abuse laws for the purpose of allowing hospitals to support physician use of health information technology, a provision in both bills.

"We are concerned about the unintended consequences of tying physicians to hospitals financially through equipment subsidies or electronic record sharing," Ignagni said in her written testimony to the panel.

And while the American Hospital Association (AHA) praised Grassley and Baucus for recommending incentives that would reward excellence in care, the group urged Congress not to disrupt an ongoing system that has more than 99 percent of eligible hospitals reporting quality data.

"It is important the legislation be clear that its intent is not to create a separate and duplicative mechanism for quality measurement and reporting," AHA Executive Vice President Rick Pollack said in a release.

Criticisms aside, the lawmakers said their measures would dovetail to improve the quality of health care delivered while reducing its cost.

The Enzi-Kennedy bill would create a public–private collaborative for developing necessary technical standards to implement health care information technology nationwide and provide grants to help smaller hospitals and doctors afford the technology needed for "Health IT."

Expanding the use of health information technology, Enzi said, "will change the way medical care is provided in this country." Enzi and other proponents say such technology can save the nation billions of dollars in unnecessary paperwork and medical procedures while ensuring that a patient's medical information remains confidential.

"Electronic medical records, software that can warn if a treatment could harm a patient, computerized prescribing—all these can save lives and dramatically cut costs," Kennedy said.

The Grassley-Baucus measure would implement recommendations from the Institute of Medicine and the Medicare Payment Advisory Commission on creating quality payments under Medicare for physicians and other providers, such as hospitals, health plans, and skilled nursing facilities.

"Today, Medicare pays the same amount regardless of quality of care. Some people would argue that in fact, the current Medicare payment system rewards poor quality," Grassley said. "This situation just doesn't make sense to me, nor should it to beneficiaries."

Baucus said the bill "takes a crucial step towards improving the value of our health care dollar as well as the safety and quality of our nation's health care system.

The Finance panel is expected to move the "pay for performance" bill by the end of the year, Grassley said, adding that ultimately the bill might move through the Senate with legislation to reverse a scheduled payment cut for Medicare physicians.

Enzi said his committee would mark up the health care information technology bill in July.

JUNE 28, 2005 -- Cost is a major barrier for many Americans when it comes to purchasing health care insurance. For Rep. John Shadegg, R-Ariz., the solution is to allow consumers to buy insurance from any state, a step opponents say will undermine the entire health care system.

Shadegg's legislation (HR 2355), the focus of a House Energy and Commerce Health Subcommittee hearing Tuesday, would allow consumers to shop for health care the way they do for other products: via the Internet, through the mail, or over the phone. Consumers would not be limited as they currently are to picking only policies that meet their state's regulations and list of mandated benefits.

"This bill will cut costs by allowing an insurance company to go through one process and sell to people in 50 states, rather than going through 50 different regulatory processes," Shadegg said.

Citing the wide variances in individual states' rates for health care insurance, Energy and Commerce Committee Chairman Joe L. Barton, R-Texas, said Shadegg's approach adds up to "a little less government and a little more freedom" that could help make health care insurance more affordable. "Why should the consumer have to take . . . a policy that covers everything under the sun?" Barton asked.
Consumer and patient groups, as well as some lawmakers, say Shadegg's bill would cause insurers to gravitate to the four states—Ohio, Alabama, Idaho, and North Dakota—that have no coverage mandates so they could drop coverage for conditions such as diabetes and depression in order to make their policies less expensive. And Shadegg's bill would allow them to sell that coverage all over the nation, rather than having to create policies that meet each state's specific coverage mandates.

"This would clearly promote a 'race to the bottom' as insurers would be greatly rewarded for licensing their individual products in states with less regulation and fewer personnel to oversee what could be a large influx of new products," said Washington State Insurance Commissioner Mike Kreidler, a former Democratic House member himself (93-95).

Opponents of Shadegg's bill also say it would disrupt the nation's entire health insurance system because it would segment the market too dramatically. Rep. Sherrod Brown of Ohio, the panel's ranking Democrat, said Shadegg's bill would give choice to consumers now in good health while harming those who are not. "When you let insurers snake out from under consumer protections . . . coverage may be less expensive for some people. That's because it isn't available to all the others," Brown said.

Proponents of the bill fired back that if insurance were more affordable, there would be fewer uninsured. "There's not much protection to a consumer if you can't afford a policy," said Dr. David Gratzer, senior fellow at The Manhattan Institute.

Backers of Shadegg's proposal also said they doubted that consumers would purchase bare-bones policies that are without the coverage that many policies now offer, such as coverage for pregnancy or diabetes. "I think they are underestimating the intelligence of the consumer," said Robert DePosada, chairman and president of The Latino Coalition.

JUNE 28, 2005 -- A Commonwealth Fund survey released Tuesday found "broad-based support" for a special health account to pay for health services not covered by Medicare.

The national survey found that 69 percent of adults ages 50–70 support deducting 1 percent of their earnings for investment in a Medicare Health Account (MHA). The money could be used to help pay for long-term care or other uncovered healthcare expenses.

The proposal is "essentially an account that you save your own earnings in," explained Sara Collins, Commonwealth Fund senior officer and lead author of the report. Conceived of by the Commonwealth Fund as an extension of Medicare, MHAs would not be private investment accounts like those proposed by President Bush for Social Security.

The study also found that 73 percent of adults surveyed ages 50–64 would be interested in buying into Medicare before age 65.

Collins said the interest in alternative health insurance programs is not surprising given older adults' concerns about their financial and health security.

The study found that 15 percent of adults ages 50 to 64 and 22 percent of those 65–70 felt assured they would have enough income and savings for retirement. Three in five between 50 and 70 years old worry that they will not be able to afford medical care in the future.

The survey also says 12 million older adults are uninsured or have histories of unstable coverage.

Older adults with coverage on the individual market tend to have higher premiums, deductibles, and out-of-pocket costs, the study said, which leave them "substantially underinsured." Fifty-four percent of adults ages 50–64 with coverage in the individual market spend more than $3,600 per year on premiums. Among their peers with employer coverage, 17 percent pay as much in premiums, as do 6 percent of those with Medicare. The study found that just under a third of older adults with individual coverage are uninsured, compared with 5 percent of those who have employer coverage.

The survey also suggests that low-income older adults are "disproportionately joining the ranks of the uninsured."

The survey was conducted in late 2004 with a nationally representative sample of 2,000 adults ages 50–70.